Cipla steps up US expansion, buys 2 firms in $550-mn deal

Move to strengthen presence in the US

Drug maker Cipla said it was acquiring US-based InvaGen Pharmaceuticals and Exelan Pharmaceuticals in a $550-million (Rs 3,630-crore) all-cash deal to grow its footprint in the US. The acquisition will be funded through internal accruals, the company said.

Currently, the US market contributes eight per cent to Cipla’s annual revenue of Rs 11,345 crore and it hopes to increase the share to 20 per cent in the next few years. Other large Indian pharmaceutical companies such as Dr Reddy’s Laboratories (DRL) and Sun Pharmaceuticals earn over half their revenue from the US.

InvaGen and Exelan are owned by BPS Reddy-led Hetero Drugs. However, the companies are separately run and have different product portfolios. The firms had combined revenue of $225 million in 12 months ending June.

GROWTH PILL
Big ticket pharmaceutical acquisitions involving Indian firms (either as buyer or target)

• Sep 2015: Cipla buys US’ InvaGen Pharma & Exelan Pharma for $550 mn
• Jul 2015: Lupin acquires US generic drug maker Gavis for $880 mn
• Feb 2015: Mylan buys Famy Care for $750 mn to grow womens’ health care biz
• Dec 2014: Torrent buys Elder Pharma’s India & Nepal biz for Rs 2,000 cr
• Apr 2014: Sun Pharma buys Ranbaxy from Daiichi Sankyo for $3.2 bn

The acquisition, which is its second large overseas buy after the Rs 2,700-crore South African drug firm Medpro buy in 2013, will give Cipla the scale in the US generics market via a wide range of product portfolio in central nervous system, anti-infectives, diabetes as well as other value-added generics.

Cipla will acquire InvaGen’s manufacturing facilities in New York and a research and development centre — first such facility for the firm — in the US.  Rival firms DRL and Sun have facilities in the US and Lupin acquired the same via its takeover of drug firm Gavis.

With this deal, Cipla secures a manufacturing base in the US and access to large wholesalers and retailers. The deal will enable the company to grow its front-end presence in the US and increase sales of its own-branded products.

Cipla would now get access to 40 approved abbreviated new drug applications, 32 marketed products and 30 pipeline products, which are expected to be approved over the next four years. “They represent a balanced, diversified and growing portfolio targeting highly attractive, large and niche markets. In addition, InvaGen has filed five first-to-file products that represent a market size of about $8 billion in revenue by 2018,” Cipla said on Friday.

Through Exelan, Cipla gains access to government business in the US, which requires companies to manufacture locally. Cipla global chief executive Subhanu Saxena told media persons about 70 per cent of the company’s growth would come organically.

“The acquisitions are likely to get completed by the end of December and, thus, will fully reflect in FY17 financials. Thus, in FY17, the acquisitions would contribute about 10 per cent of its overall sales (estimated to be Rs 1,550 crore),” said Sarabjit Kour Nangra, vice-president, research, Angel Broking.